Will higher gas prices derail the economy?

Cesar Salcido fuels his tractor trailer truck at the Pilot Truck Stop off the I-905 in Otay Mesa before the long trip to Houston. Higher gasoline prices are affecting everything from the cost of transporting goods to growing crops. NELVIN C. CEPEDA / U-T SAN DIEGO

Cesar Salcido fuels his tractor trailer truck at the Pilot Truck Stop off the I-905 in Otay Mesa before the long trip to Houston. Higher gasoline prices are affecting everything from the cost of transporting goods to growing crops. NELVIN C. CEPEDA / U-T SAN DIEGO

Best gas prices?

As gasoline prices continue to shoot skyward, oil is quickly replacing the jobless rate as the nation’s chief economic concern.

On Friday, a gallon of regular gasoline in San Diego averaged $4.37, up 57 cents from a year ago. It’s little better across the nation, with drivers paying an average $3.74 per gallon. Although that’s well below the national record of $4.11 a gallon set in July 2008, the question on everyone’s minds is whether higher gas prices will derail the economic recovery?

Although that’s not likely at this point in time, rising energy prices tend to have a lagging economic impact, said James D. Hamilton, economics professor at the University of California, San Diego. Unless income keeps pace - which isn’t happening for most people now - higher fuel costs will eventually displace other expenditures, he said.

In the meantime, Republicans are pushing for more oil drilling and construction of a fuel pipeline from Canada. President Obama is using rising fuel costs to renew his campaign to halt government tax breaks for the oil industry.

But oil industry analysts say there’s relatively little either party can do to rein in the price rise.

What do you think?

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Iran - and its warnings about blockading the Gulf of Hormuz if the U.S. and Europe continue to tighten economic sanctions - remain the main reason for the price spike.

“America is producing more oil today than at any time in the last eight years,” Obama said this week.

In 2011, the U.S. produced 173 million barrels of oil, the largest total since 2003, which reduced the need for imports, according to data from the U.S. Energy Information Administration. Last year, the U.S. imported about 44.8 percent of the oil it used, down from a peak of 60.3 percent in 2005.

Republicans say many of the increases in U.S. oil production are tied to actions of the Bush administration.

However, the White House said it is opening oil fields at about 3 million acres per year.

But if we’re drilling in so many places, why are prices still going up?

The problem is that oil is a global product with globally based pricing. U.S. production is too small to make a noticeable dent in the global prices, said Severen Borenstein, professor at the Haas School of Business at UC Berkeley.

So the question remains. Can the economy withstand the gas price increase we’ve seen so far? “Yes,” says David Kelly, chief market strategist at J.P. Morgan Funds.

The reasons:

•Jobs. The country has added 2 million over the past year. Those 2 million people with paychecks will spend them, which helps the economy.

•Job security. Jobless claims, the best measure of layoffs, are at a four-year low. Fewer Americans are worrying about losing their jobs, so they can take the punch of higher gas prices.

•A steadier housing market, the Dow Jones industrial average’s clearing 13,000 and other signs of an improving economy also help. Add them together and consumer confidence is the highest in a year. More confidence makes people more likely to keep spending on other things even if gas goes up.